Long-term solution needed for college costs
Congress has failed yet again to come to an agreement that would keep interest rates on student loans at 3.4 percent.
Interest rates on student loans doubled to 6.8 percent on July 1 because Congress didn’t act. Absent congressional action in the coming weeks, the increase could spell an extra $2,600 for an average student returning to campus this fall, according to Congress’ Joint Economic Committee.
Unfortunately, a Democratic-led effort to keep interest rates low failed Wednesday to move forward in the Senate, setting the stage for more political sparring and little time remaining before Congress adjourns for its August recess.
The White House and most Democratic senators favored keeping the rates at 3.4 percent for now and including a broad overhaul of federal student loans in the Higher Education Act rewrite lawmakers expect to take up this fall. The one-year stopgap measure failed to overcome a procedural hurdle as Republicans -- and a handful of Democrats -- urged colleagues to consider a plan that would link interest rates to the financial markets and reduce Congress’ role in setting students’ borrowing rates, according to an Associated Press report.
"Today our nation’s students once again wait in vain for relief," Sen. Tom Udall, D-N.M., said on Wednesday. "They expected more of us and I share their disappointment."
"I have heard from more than 700 Vermonters and people around the country that college costs too much and interest rates on student loans are too high. But Senate Republicans today blocked the same simple, straightforward solution that Congress approved just last year," the independent senator said in a statement Wednesday. "While today’s vote was disappointing, we must continue working to find a short-term solution to keep interest rates down while developing a long-term solution to make college more affordable for working families."
Other Democrats said Wednesday’s vote would not be the final word on student loans and said the failure would nudge members from both parties back to the negotiating table. Even those who favored an extension said they were not inflexible if Republicans were willing to compromise as well.
"Ultimately, we’ll need a bipartisan solution, but first Congress will have to do its homework," said Sen. Jack Reed, D-R.I., who helped push extension measures. "Republicans will have to come to the table and agree to address the bigger picture of college affordability in a meaningful and comprehensive way."
Both Sanders and Reed hit the nail on the head when they said lowering the interest rates is necessary for the time being, but for the long term we as a nation need to address the issue of college affordability. Or, more accurately, the inability of many middle- and lower-income families to afford today’s ever-escalating tuition costs.
There’s no denying that college, or any type of post-secondary education, is a sound investment in the future, one that leads to better paying jobs and greater security for tomorrow’s workforce. But high tuition costs and the fear and risks associated with piling on too much student debt create a huge barrier for too many people.
This is not a problem that Congress alone can resolve. Fortunately, some colleges and state legislatures are already coming up with creative, out-of-the-box solutions that are worth consideration.
Indiana University, for example, recently launched the following initiatives designed to control student debt levels: Require all incoming students to take an online financial literacy course; offer a summer tuition discount of 25 percent so students can save money and stay on track to graduate on time; and a Finish in Four program that provides juniors and seniors who are on track to graduate in four years with a financial award that offsets any increase in tuition fees for their final two years.
Meanwhile, the Oregon State Legislature is considering a pilot program, called Pay It Forward, that would eliminate college tuition altogether and fund higher education through a 3 percent deduction from graduates’ paychecks for about a quarter century. This would address the perceived risk of borrowing for college as students don’t begin repaying until after landing a job, and having the payments based on their salary makes them more manageable.
The only question with this program, of course, is how to pay for the estimated $9 billion start-up costs. Still, this idea has sparked some interest around the country and is being discussed in several other states, including here in Vermont.
Another idea considered by some states is a program that would forgive federal loans for students who stay in the state after graduating. For Vermont this would solve the problem of our youngest and brightest workforce leaving the Green Mountain State for greener pastures elsewhere.
These are just some of the potential solutions we need to start considering, and soon, or we risk losing a whole generation of the highly skilled workers that are necessary to remain competitive with the rest of the world.